Web 2.0 Podcast: A Conversation with Ross Levinsohn

Ross Levinsohn is president of News Corporationís Fox Interactive Media. He talked with Web 2.0 Summit program chair John Battelle talks to Levinsohn about everything from the year since his company bought MySpace to his recent concern that he didn't have a chance to bid on YouTube.

ANNCR:
Ross Levinsohn is President of News Corporation's Fox Interactive Media. Web 2.0 Summit 2006 program chair John Battelle talks to Levinsohn about everything from looking back at the year since his company bought MySpace to his recent concern that he didn't have a chance to bid on YouTube. Here's the conversation with Ross Levinsohn at the Web 2.0 Summit.

John Battelle:
For those of you who don't remember, in September of last year, Ross led the charge to acquire MySpace for News Corp and has reorganized News Corp interactive.

Hey Ross, how you doing? Welcome. You sit here. I'll sit there.

Ross Levinsohn:
It looks like my shrink's couch.

John:
[laughs] Make yourself comfortable.

Ross:
Can I lie down?

John:
Yes. You just get comfortable there. He knows me too well.

You acquired MySpace. That was a move that many didn't understand at the time and then MySpace just exploded, so congratulations. But something recently happened that I want to talk to you about. The other guys bought YouTube.

Ross:
Who?

John:
The guys up in Mountainview, those guys?

Ross:
Yes, I know them.

John:
The ones that came down to say, "Gee I'm sorry" afterwards.

Ross:
I don't even get to catch my breath. I ran into somebody...

John:
This is after the deal, you noted and this was widely quoted in the newspapers "If you're going to run a sale process of one of the hottest companies on the Internet, you should do that openly. You don't necessarily get the best value in the market. If it were out being shopped maybe it could have been sold for two billion." Is that what you were planning on offering?

Ross:
No, I actually said that at the number that it sold out it probably wasn't a number that we would have participated in. First of all, I've said this many times. I think YouTube is a fantastic property, absolutely fantastic. I think it was probably the right deal for them and certainly an interesting deal for Google. What I was referring to is that there was a lot of frenzy about YouTube, rightfully so. I think having participated in an auction or two for Internet companies over the last year that it would have certainly been a fun process to watch. I don't know where it would have ended to be honest.

My understanding of how it went down is that it was really fast. We've participated in those types of deals as well. You sort of get into that crazy mode of acquisition and you go and do whatever it takes to close a deal. Stepping back a couple of weeks later it was probably the right deal for both companies. I think it's going to be successful. We'll see where it all ends up. We're playing in it.

John:
Give us a little insider information here. What happened once you heard about the deal, you and the folks you work with weren't pleased. Is that fair?

Ross:
No, that's not fair.

John:
I'm just trying to get to the visit, which was reported in the journal.

Ross:
We can jump to that point.

John:
What happened in the visit?

Ross:
Not that we weren't pleased. I think that we made no bones about how we felt about YouTube. This is pre-Google. I spent some time with Chad and Steve and with Sequoia and have always expressed, I think, my support not that it means anything but I think it's a great site. They knew that we were certainly interested and if there was ever an opportunity, we hoped that we would have at least been a part of the process.

Again, knowing how it went down and knowing what the number is, no issue from our perspective. So, the visit we'll jump back.

John:
Why did they come down afterwards? Was it that MySpace was driving so much YouTube traffic? Was it that Fox and News Corp is such a huge content owner that it would behoove them to make good with you, make nice with you?

Ross:
They didn't have to make nice. By virtue of the deal we cut in August with them - late July, August which in itself was a crazy.

John:
A very big deal. We're going to get to that.

Ross:
It was a crazy five days of doing that deal. We're a very big partner and they are our biggest strategic partner. It's not like there isn't crossover between YouTube and what we're doing on the web. I thought it was pretty genuine of Eric and some of the others Meade and Tim - to come down. We had a pretty open, honest good session. We've been driving hard to close our deal. In fact, we put our deal up in beta two days ago with Google in certain areas across FIM. Everything's fine.

I view the web as, in many cases, you're competitors with the same people you're partners. It's true for us in sports, as an example. We've had a deal with Microsoft with MSN for the last three years or so in sports and we're partners in that area. Yet we're competing directly on spaces on MySpace, video in video, and games in games. It doesn't harm our relationship at all. You have to manage these things.

John:
So the deal you did with MySpace, maybe you can give us the half minute or minute explanation of the 900 million dollar deal with Google for across Fox - but what exactly is that 900 million dollars earmarked for?

Ross:
It's pretty simple. Google will power search on our sites with the exception of FoxSports.com because of our relationship with MSN. It will sell advertising around searches. It will also sell contextual advertising in certain areas on our site. It's a pretty simple deal. It was complex in the negotiations and the contract but it's a pretty simple deal.

John:
But that the number is guaranteed to you, right?

Ross:
I've gotten in trouble in the past about talking about this. I'm really not supposed to talk about contractual terms, but I think what you've read is accurate. [laughs] I'm going to get myself fired.

John:
What did you pay for MySpace?

Ross:
We paid 580 million for MySpace.

John:
And you now have guaranteed 900 million dollars of revenue.

Ross:
Yes.

John:
That's a pretty good deal.

[laughter]

Ross:
Can I give you Rupert's number for bonus time?

John:
[laughs]

Ross:
Can I go back to that for a second? Just to put it in perspective, I remember literally like it was yesterday, a year ago people were saying that I was the dumbest guy in the planet. I mean, 580 million dollars for a social network. I think you wrote some of that actually.

John:
Oh no, no. I wrote that it was -

Ross:
It's crazy.

John:
It made a lot of sense.

Ross:
You're in a frenzy on everything right now and you're neither as dumb nor as smart as people say you are as a person or as a company. A lot of entrepreneurs in this room, a lot of investors, this is a really hard - you're one of them - a really hard business. Nothing is easy. Nothing is as it seems. I keep looking for that wizard behind the curtain who is controlling everything. I haven't found him or her yet. It is slogging. This is like two a days in football practice every single day of my life. It's hard work. MySpace was not as bad as what everybody said it was when we did it in November, December last year. It is a fantastic property today that if we don't pay 100% attention to, just like any other business, it's at risk.

John:
Right.

Ross:
It's why I don't sleep. It's why I put on 30 pounds in the last year. It's terrible.

John:
Did you see the cookies in the green room?

Ross:
I had three of them.

John:
Yes.

[laughter]

Ross:
It's not even lunch and I had three of them.

John:
We are running a little late. We're aware of that. We're going to try and reschedule a couple of things so we can get to lunch then bring those people back after lunch.

Getting back to this, let's just drill down into MySpace a little bit. Some folks in the audience may be surprised to learn, or maybe it will ring a faint bell, that MySpace is actually the largest streamer of video clips on the web, larger than YouTube, which re-prices your deal from 500 and some odd million dollars to well over 1.65 billion, right? Are you ever going to sell MySpace?

Ross:
[laughs] You'd have to ask Rupert. No. Never?

John:
That was just a throw away question. So you find yourself now with that asset, this social network and all that other great stuff, but where's that going? Where are you going to take that?

Ross:
I think we've been pretty systematic about it. We bought it. It was a startup company. It had the challenges that any startup had. We've plowed tens of millions of dollars into the infrastructure. You've got the second biggest site by terms of page use on the Internet right now. When you're running an eighth of the number of servers that your nearest competitor is running, you've got problems. We've been a very good customer for some hardware and software manufacturers over the last year.

We really spent the last nine months building out the infrastructure there. We're trying to surround it with other properties that work. Again, it gets no attention whatsoever, unfortunately, IGN - which we actually spent more money on - continues to be a leading property in the entertainment space. It's a fantastic group of people here. It continues to grow - for a mature business - at a rate of growth that we're seeing at that business financially and from a traffic perspective is exciting for us, yet nobody even knows we own it.

I say this all the time. I'm trying to drum up some acceptance. We have 1, 400 people who work at FIM now; 30% of them are MySpace people. We've got a lot of other business that are doing great, but because of the juggernaut that it is, it pretty much overwhelms everything.

John:
Let me ask one last juggernaut question then we can move on to some other things. According to Nielson Net Ratings, traffic to MySpace declined from August to September. That's the month kids go back to school and so on, so that was a surprise I think to many in the industry. Are you worried about that?

Ross:
No, it's actually not. If you look at Nielson or comScore a year ago, it's seasonal. We had a dip. We were pretty flat in a dip a year ago. Most sites are down August to September except probably sports; fantasy is such a big kicker in August. MySpace is growing like crazy. We're still adding globally - I actually looked at the number - we added over 320,000 new profiles yesterday. Think about it, to make a joke about it, we're adding the size of Buffalo every day.

We launched MySpace Japan. We're the number one teen site in the US. In the 18-34 demo, we've grown at 300% year to year. In the 12-17, we're the number one site. We've added 60% year to year. The numbers are panels but I can tell you we're growing like crazy in the engagement side of things. In the last six months, usage on MySpace, pages per visit, time spent - time spent has grown by 30% in the last six months - so the engagement story at MySpace continues to be astounding. We had 38-billion page use last month. This isn't a year. I've heard the criticism but I can tell you from looking at the real numbers and the usage on the site we're fine.

John:
all right. Now we have teens and parents tomorrow that are going to be talking, so we'll ask them how they feel about MySpace. You'll stick around to hear what they have to say.

Ross:
Hopefully they'll say it's gotten better. That's one of the things in buying the site. We spent a lot of time on safety and continue to.

John:
Let me pull back now and ask you, as someone who has - and by the way, thank you very much for being a judge on the launch pad and the advisory board there - we've got a room full of entrepreneurs. What do you look for, not specifically like I've got a company doing X, but what do you look for in a company when you're thinking about an acquisition, a, and b, are you still looking?

Ross:
If you're not looking you're not doing your job. We continue to look and meet. We've certainly not bought a lot of companies. In the last four or five months, we haven't bought a single company. We look. We spend a lot of time.

John:
Does that mean that the companies aren't any good anymore?

Ross:
No.

John:
Are all the good one's gone?

Ross:
You know I've been here for four hours this morning. My head is spinning with what I'm seeing. To me it's the greatest time in the history of any business, certainly in the media business. The things that I'm seeing - because of the platforms that are out there, because of how easy it is to start a business today - the things that I'm seeing just blow me away. Probably the toughest thing for me is I can easily talk myself into almost anything. I get very excited about new things and what people are doing. Now that we have this huge base at Fox, plugging something into Fox Interactive Media is pretty simple. We've managed to get our infrastructure together, get our modernization together, and get our back office together, so if we buy something now... The first year was tough. It's going to be a lot easier going forward. I probably met with four or five companies this morning. Every one I look at I'm like, "Wow, that is just great. Isn't it fantastic? Ten people in a room in Oklahoma."

So what I look for really starts with the people. I don't see much negative. It really starts with the enthusiasm of the entrepreneur. You can read that. You get in a room with somebody and you know if it's real or not. It's interesting, I have seen companies in the last six or nine months where I know the person started the company only to sell it.

John:
Right. Well actually Barry Diller yesterday commented if you are an entrepreneur with a great idea that you really believe in, don't sell it.

Ross:
I disagree with that to be honest. I think in some cases, yes. In other cases no. Not to hedge but a feature does not make a company. We've got a lot of great features in the world today. Plugging a feature into a network that can provide a launch pad for it makes sense. If you're building a feature then I think you should sell it. If you're building Google, maybe you shouldn't sell it. Right? I don't know if you can build another Google.

John:
Let's hope so.

Ross:
My point is I think there are companies that if you don't sell, you run the risk - because it's so easy to start a company and technology is not proprietary anymore, etc - that tomorrow, 12 other things can pop up that can obliterate you. Or, even worse, one of the big giants can take 10 engineers, put them on the side, and say spend three months developing and plug it right in.

John:
We're going to talk about that later with Steven and Jim Lanzone, who are trying to compete with Google. There are microphones up here. We have time for a couple of audience questions. If you want to ask them, please come up now. I'm going to ask you one more question.

This is one of those things that you've just got to bring up. One of the founders of the company which owned MySpace keeps suing you guys. He sued you for a shareholders suit, which was thrown out in October. Now he's back and suing you for censorship claiming that MySpace is cutting off access to various sites, including ones that he runs and that you're doing it on purpose to shut him up. Can you give us a response on this fellow and what you think of him?

Ross:
It's Brad Greenspan who founded a company called eUniverse, which ended up buying ResponseBase, which was the guys, Chris and Tom, who created MySpace. He has lost every single motion he has charged. There are probably too many young people in this audience. Remember the Mike Tyson-Trevor Berbick fight, when Mike Tyson won the title the first time? He kept knocking Berbick down and Berbick would get up. Tyson would knock him down again but he would keep getting up. Finally I think he got up and fell down on his own. The referee couldn't even help him. I kind of feel, we're going through this dance with -

John:
[laughs]

Ross:
Brad Greenspan - boom, down, boom, down - and the courts keep saying you're losing. There's no merit to any of this. It's kind of sad. For a guy who was kicked out of the company - literally the founder - the employees, two years before we bought the company, kicked him out. For a guy who made 40, 50, or 60 million dollars on the sale, come on. Life's too short. If there was any merit to it he would have won. There's no merit.

John:
I felt it was my responsibility to bring it up once there's a lawsuit.

Ross:
all right.

John:
We don't have any questions lined up? We have one? Is that Mark? Hey buddy. How are you doing?

Ross:
I have to go.

Mark:
Hey Ross, how are you doing?

[laughs]

Mark:
Ross, the number two site, Facebook, recently opened up their API's to allow their users to move their data to other sites. We love MySpace, but as a Mysp user, I would like to move my data to, let's say to Vox the new Six Apart product, or to the dead product Friendster, or to my product. How about MySpace opening up their API so us users can move our data around?

[applause]

John:
Supported by the audience.

Ross:tanderson@myspace.com. Tom Anderson is the keeper of the flame. Not to beg off the question - great idea. Something we've been looking at and considering. We are very sensitive to making sure that the audience has the tools and the needs and does what it wants with MySpace. Tom has spent a lot of time on this, Tom and his team - there's a big team there. It's something we're looking at. We're not ignoring it. I'm not saying we're doing it. I'm not saying we're not going to do it. But you're not the first person to bring it up. And it's a legitimate question.

Mark:
Good I know my friend Dan Gould supports it.

Ross:
I'm sorry?

Mark:
Dan Gould. He's an employee of yours.

Ross:
Yes, I know. Where is Dan? Is he here?

Mark:
He's here somewhere. Anyway he likes the idea.

[laughter]

John:
It must be done then.

Ross:
Dan, come on up!

John:
I want to thank you Ross. We're out of time but thank you for coming, for submitting yourself to this.

Ross:
Thank you.

John:
I appreciate it.

[music]

ANNCR:
A conversation with Ross Levinsohn at the Web 2.0 Summit 2006.

Daniel H. Steinberg
is the editor for the new series of Mac Developer titles for the Pragmatic Programmers. He writes feature articles for Apple's ADC web site and is a regular contributor to Mac Devcenter. He has presented at Apple's Worldwide Developer Conference, MacWorld, MacHack and other Mac developer conferences.